Minority shareholders of Sberbank and VTB Group said Friday that they were unhappy with scant dividends from a rocky 2009, which saw surging bad loans take a bite out of the state-run banks' profits.
Both companies held their annual shareholders meetings Friday — Sberbank a few hours earlier — and voted to approve far lower dividends than in 2008, before the global financial crisis had severely dented lenders' earnings.
Sberbank voted to cut its 2009 dividend by more than 80 percent to a total of 2.18 billion rubles ($69 million), compared with 10.99 billion rubles a year earlier. The bank will pay 8 kopeks per ordinary share and 45 kopeks for each preferred share.
"For the near future, we'll keep this bar of 10 percent of net profit," Sberbank chief executive German Gref told shareholders, Reuters reported.
The dividend policy caused discontent among stakeholders who complained that Sberbank appropriated a smaller share of its profit for dividends than other banks. Gref defended the figure, however, saying Sberbank shareholders had not been hit as hard as those of other lenders.
"Someone — I won't say who — posts losses, not profit. No profit means no dividends," he told shareholders.
Gref was likely referring to VTB, which posted a net profit of 15.3 billion rubles in the first quarter of 2010 after six straight quarters of losses.
But VTB managed a tiny profit to Russian accounting standards for the full year of 2009, and its supervisory board recommending paying 25.5 percent of the sum. The payout of roughly 6 billion rubles ($190 million) means that shareholders will get about 0.06 kopeks per share.
A year before, Russia's second-largest bank paid 3 billion rubles in dividends, or 11.2 percent of its net profit.
The dividend reductions came after First Deputy Prime Minister Igor Shuvalov proposed a measure last month that would force state-owned companies to pay no less than 25 percent of their net profit in dividends.
Last year, the government waived dividend payments for state companies to help them weather the economic crisis. As a result, the federal budget lost up to 20 billion rubles, according to the Federal Property Management Agency, which holds the state's stakes in many businesses.
Shareholders were also grumbling Friday as they were asked to approve compensation for the supervisory boards of Sberbank and VTB. About 500 owners attended the meetings, many of whom complained that they would need to take taxis to make it to both, Vedomosti reported.
Sberbank will pay 3.5 million rubles ($111,000) to each of the heads of its supervisory board's committees, while independent members will get as much as 2.5 million rubles.
Rajat Gupta, a former managing director of consulting company McKinsey, will receive a record sum of 428,500 euros ($512,000) plus $15,714 in compensation for expenditures he incurred as a Sberbank supervisory board member.
Gupta withdrew his name from Sberbank's ballot Wednesday, the lender said, adding that he would stay on as a strategic adviser to the board. He is being investigated in the United States as part of an inside trading probe, The Wall Street Journal has reported.
He was replaced by Sergei Shvetsov, head of the Central Bank's financial markets department.
Meanwhile, a few members of VTB's board — president Andrei Kostin, Central Bank First Deputy Chairman Alexei Ulyukayev, Aeroflot CEO Vitaly Savelyev and Russian Pension Fund director Anton Drozdov — turned down their compensation.
The four other eligible members of the board will get more than 10 million rubles together.
Officials at VTB and Sberbank said they might start paying bonuses to top managers with their shares.
"We'll try to bring up the possibility of paying part of the compensation or in full with the bank's shares for discussion by the supervisory board. I think this idea is not bad," Gref said.
The options program for three state-owned banks — Sberbank, VTB and Rosselkhozbank — will be passed simultaneously, Ulyukayev said, without giving a timeline.
The atmosphere at the VTB shareholders meeting was extremely stressful, said Alexei Navalny, a lawyer who campaigns for the rights of minority shareholders.
Small-time shareholders were very harsh in their assessments, with some of them calling the bank's managers thieves, said Navalny, who arrived at the VTB meeting after visiting the meeting in Sberbank.
"Like I expected, the shareholders meeting was held in a very tough and stressful atmosphere. For the first time in my practice … there was not a single positive speech or even a minimum of supporting words for VTB managers," he told The Moscow Times.
Minority shareholders caused a scandal at the 2008 VTB annual shareholders meeting, calling for management to resign and compensate stakeholders for their losses after a heavily promoted "people's IPO" in May 2007.
The VTB offering, which attracted $8 billion, was successful for the bank but left more than 130,000 retail investors in the hole after the bank underperformed the market.
The company's shares had fallen just over 40 percent from the IPO price by June 26, 2008, the date of the meeting —? and that was before the stock market crash the following fall.
Last month, Kostin announced a three-year plan to double VTB's stock price to 15 rubles — slightly above the IPO price of 13.6 kopeks per share. The bank also plans to bring its return on equity, a measure of profit, to at least 15 percent by 2013, according to the plan approved May 26 by the supervisory board.
VTB's shares closed 3 percent lower on Friday at 7.5 kopeks on the MICEX. The exchange's benchmark index of 30 stocks fell 1.3 percent.
Navalny called on shareholders to vote against approving VTB's 2009 financial report and called on the supervisory board to conduct an internal investigation into VTB's purchase of drilling equipment from a Chinese producer for $650 million in 2007.
The bank's leasing division lost more than $160 million in payments for agent services of Cyprus-registered Clusseter Limited after buying 30 drilling rigs for lease, Navalny wrote in his blog in December, citing an investigation he conducted.
VTB's management on Friday said they would not investigate because that was prosecutors' responsibility, Navalny said by telephone.
The director of VTB's leasing unit was fired after the scandal broke.
Sberbank and Vneshekonombank may restructure a $4.5 billion loan VEB handed to United Company RusAl in 2008, Gref said after the shareholders meeting.
In October 2009, VEB prolonged RusAl's debt for a year.
"We are working on refinancing and are structuring the deal with VEB," Gref said.
Correction for this article: In the original version, the article misidentified Rajat Gupta as managing director of McKinsey. He is, in fact, a former managing director. Also, information that Gupta is being investigated in the United States as part of an insider trading probe should have been attributed to The Wall Street Journal.